Customer Reviews

Condominium Act amendments and their implications

Condominium Act amendments and their implications

In a move to
address numerous complaints from condominium buyers, the Thai
government enacted Condominium Act No. 4. Effective as of July 4, 2008,
the new law significantly expands the scope of consumer protection to
potential condominium buyers by amending several provisions of the
existing Condominium Act (1979).

Since its passage almost 30
years ago, the original Act has been amended three times in an attempt
to keep the law up-to-date with new private sector developments and
practices. However, this latest amendment has been one of the most
comprehensive overhauls - extending buyer protection, imposing
additional requirements and duties on developers, and modifying
restrictions on foreign ownership.

Buyer protection: Prior to
the new amendment, there were few legal provisions to protect
condominium buyers. Potential buyers risked exposure to developer
bankruptcies, unfair contracts, unfinished or substandard construction,
disputes over maintenance fees, and various other problems. An
aggrieved buyer's only options were to file a complaint with the
Consumer Protection Board and hope that the Board would take action, or
initiate a potentially lengthy and expensive legal case against the
developer. The new amendment contains several provisions designed to
protect potential condominium buyers.

Standardised contract
forms: A key provision in this new set of protections is a requirement
that purchase contracts between the developer and buyer conform to a
standard format prescribed by the Interior Ministry, promoting a degree
of uniformity and certainty. Furthermore, any clauses in a purchase
contract that deviate from the standard format and are not in favour of
the buyer will not be enforceable. The required clauses include basic
information such as the developer's ownership of land and location,
price, and size of the condominium and development complex.

More
importantly, one of the required clauses is a detailed objective of the
usage of every area of the condominium including individual
condominiums, common property, and facilities. This provision addresses
prior buyer complaints of developers who changed the common area for
other uses or built additional units over common areas.

Accurate
advertising: Developers must also take careful steps to ensure that
their advertisements such as pictures, statements, or brochures
truthfully and accurately represent the completed condominium. Any
advertisement will be regarded as forming part of the purchase contract
and any inconsistencies between the advertising and the actual purchase
contract will be interpreted in favour of the buyer.

Additional
duties and restrictions on developers: Payment of monthly maintenance
fees for unsold units. In the past, disputes often arose between
developers and buyers over the payment of maintenance fees for units
that had not yet been sold, resulting in a shortfall of maintenance
funds. Under the new amendment, the developer is responsible for paying
taxes, common service expenses, and common maintenance expenses for
units to which ownership has not yet been transferred.

Operation
of businesses within condominium: New restrictions state specifically
that businesses are only allowed to operate in designated areas, and
the developer must arrange for separate entrances and exits for these
businesses in order to protect residents from noise and disturbances.

Penalties
for violations: The new amendment also provides a comprehensive list of
penalties for developers who violate any of the new provisions. The
biggest penalties are for violations of the standard form contract or
for violations of accurate advertising. A violation of the standard
format contract carries a fine of up to 100,000 baht while a violation
of accurate advertising carries a fine between 50,000 and 100,000 baht.
A violation of the provision regulating businesses within the
condominium carries a fine of up to 50,000 baht and an additional 5,000
baht for each day the violation is not fixed.

Changes in
restrictions on foreign ownership: Under the original Condominium Act
(1979), foreigners were explicitly granted the right to purchase and
own condominiums, but foreign ownership of total units within a
development could not exceed 49%. Condominium Act No. 3 (1999)
liberalised these restrictions and allowed foreigners or their juristic
persons (holding companies) to hold in aggregate more than 49% of total
condominium units in certain developments (usually small developments
not exceeding five rai). The new amendment repeals these exceptions and
reinstates the 49% ceiling from the original Condominium Act (1979).

Viewed
as a whole, the new Condominium Act is part of a larger consumer rights
movement in Thailand. Along with the newly enacted Escrow Act (2008),
the Thai government has been moving to address complaints of consumer
fraud and abuse. In general, the new law creates some minor burdens for
developers while extending significant protection to consumers.